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Unformatted text preview: Name form A Econ 1 Second Midterm November, 2007 We will award 5 points for doing the following correctly. FILL IN THE BUBBLES on your scantron for your name , your perm number , and the test form type . Use pencil only . All bubbles must be completely filled in. Each correct answer is worth 5 points. Answers left blank are worth 2 points. Wrong answers are worth 0 points. True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. Suppose that the supply curve for a good is perfectly inelastic, and when there is no tax the equilibrium price for this good is $50. In competitive equilibrium, if the government introduces a sales tax of $20 per unit which is collected from buyers, the profits of suppliers will fall and the total consumers surplus of demanders will be unchanged. 2. A laborer who is unemployed but would like to work at the current wage is said to be voluntarily unemployed. 3. A profit-maximizing firm will always want to hire the number of workers that gives it the highest average profit per worker. 4. Competitive equilibrium theory tells us that a legal minimum wage that is lower than the competitive equilibrium wage will cause wages to fall below the competitive equilibrium wage level. 5. If the demand curve for labor is elastic, a minimum wage that is set higher than the equilib- rium wage will decrease total labor income. 6. To maximize its profits, a firm should hire the number of workers that maximizes the marginal value product of labor. 7. If the cost of producing one more unit is lower than the price at which a monopolist is cur- rently selling its output, then the monopolist will increase its profits by selling one more unit. Econ 1 2 8. If the demand curve slopes down, then the sum of demanders profits and suppliers profits...
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- Spring '07